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The perks of being in the smaller team: incentives in overlapping contests

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  • Christoph March

    (University of Bamberg
    CESifo)

  • Marco Sahm

    (University of Bamberg
    CESifo)

Abstract

We investigate overlapping contests in multi-divisional organizations in which an individual’s effort simultaneously determines the outcome of several contests on different hierarchical levels. We show that individuals in smaller units are advantaged in the grand (organization-wide) contest for two reasons: First, the incentive to free-ride is smaller in inter-divisional contests. Second, competition in the intra-divisional contest is less fierce. Both effects induce a higher marginal utility of effort provision. We test the model in a laboratory experiment and confirm its main predictions. Our results have important consequences for the provision of incentives in organizations and the design of sports competitions.

Suggested Citation

  • Christoph March & Marco Sahm, 2025. "The perks of being in the smaller team: incentives in overlapping contests," Review of Economic Design, Springer;Society for Economic Design, vol. 29(3), pages 585-610, September.
    • Handle: RePEc:spr:reecde:v:29:y:2025:i:3:d:10.1007_s10058-023-00331-z
    DOI: 10.1007/s10058-023-00331-z
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    References listed on IDEAS

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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